frequently asked questions
FAQ Regarding R&D Tax Credits
Many SMEs are surprised to learn that they qualify for R&D Tax Credits.
These are just some of the questions you may have, but please contact us for rapid confirmation that you qualify.
Research and Development Tax Credits are a tax incentive designed to encourage UK companies to invest in their research and development (R&D). The tax credits can allow a company to reduce their tax bill or claim cash credits as a proportion of their R&D expenditure over the qualifying period.
Yes. The Small to Medium Enterprise (SME) and RDEC schemes are designed to reward research and development activity by providing either relief on Corporation Tax, or cash credits even if the business is loss-making.
Yes. The success of a project is irrelevant in terms of making a claim. In fact, a failure might be good in terms of showing that the complexities of the R&D project in question.
Due to the wide-reaching nature of R&D, 78% of businesses could be eligible for the scheme. If your business is trying to resolve scientific or technological uncertainties with some level of risk, you are carrying out the right type of R&D. It does not matter which sector your business is in.
If you have carried out eligible R&D activities within the past two years, then yes.
The easiest way to check if you qualify is to use our online calculator or get in touch with us.
If you are problem solving and looking to overcome technological difficulties by creating new products and services or improving existing ones, then you could qualify. Your R&D doesn’t even need to be successful.
No. There are two incentives to choose from so all businesses can apply. The first, the SME scheme, is for start-ups and business with fewer than 500 staff and turnover under £100 million. The second is the RDEC scheme for large companies, which is defined as having more than 500 staff and generating turnover in excess of £100 million.
This depends on the size of your business. If you are an SME you can claim up to 33% of your total R&D costs. If your business is profit-making this is seen as a Corporation Tax reduction, or if the business is loss-making then this is in payable cash credit and is not taxable.
A large company is able to apply for 13% back through the RDEC scheme and this is awarded in the same way as SMEs.
For staff working directly on the R&D project, you can claim a proportion of their:
- salaries
- wages
- Class 1 national insurance contributions
- pension fund contributions
You can also claim for administrative or support staff who work to directly support a project (for example, specialist cleaning staff). But you can’t claim for clerical or maintenance work that would have been done anyway, such as managing payroll.
You can claim against 65% of the relevant payments made to an external agency if they provide staff for the project.
Yes, depending on whether you are claiming under the SME or RDEC scheme, you may claim for costs incurred through subcontracted work. There are certain conditions, but we can figure out all of that for you!
The company can claim for all consumable items used throughout the R&D process, including:
- material
- utilities
the company cannot claim for:
- capital expenditure
- the cost of land
- the cost of patents & trademarks
- rent or rates
You can claim up to 2 years after the end of the accounting period the R&D expenditure relates to.
If your business has received a grant or a form of financial aid, this can compromise your R&D tax claim. Under European Commission rules, companies are not allowed to receive more than one type of notified state aid for the same development work. Although rules differ, there are still ways in which UK firms can claim back their R&D spend.
We can provide you with expert guidance in this situation, so contact us today.